The annual report, compiled by the University of Tennessee’s Boyd Center for Business and Economic Research, cites the fading effects of the federal tax cuts, rising interest rates, increased government spending and the uncertainty surrounding the tariff war as reasons to expect growth to diminish.
However, Boyd Center Associate Director Matt Murray cautions that his report should not be misconstrued as a “recessionary outlook.”
“It’s not a recessionary outlook, it’s simply an outlook that calls for slower growth (and) a slower pace of economic expansion than the current year,” Murray said.
Non-farm jobs are expected to grow by 1.4 percent in 2019, translating into nearly 43,000 new jobs for Tennesseans in 2019, but that is still less than the 1.8 percent growth of non-farm jobs in 2018.
The economists predict Tennessee’s expected economic growth will largely match growth in the national economy, with the state’s inflation-adjusted gross domestic product, or GDP, predicted to rise 2.6 percent.
At the local level, Murray and his team predict the economic growth will not be evenly distributed among rural and metropolitan Tennessee counties.
“I think it’s going to be a significant difference. There will be some exceptions to the point I’m about to make here, but generally, the further you go away from the core of the metropolitan areas of Tennessee, you’re going to find weaker growth,” Murray said.
“If you go out away from the metro areas to counties that are relatively isolated, that’s where you see very weak economic growth, if not outright economic contraction.”
Murray called this decline of economic activity in rural counties “disturbing,” but he said it’s not a new trend.
“It’s really a pattern that’s been unfolding for well over a decade as businesses and people alike have decided they would rather live in metropolitan places or operate a business in metropolitan places as opposed to rural places,” Murray said.
The Tri-Cities, where rural counties surround three sparsely metro cities, could be considered a microcosm of the statewide economy, Murray said.
“Your core counties are likely to do reasonably well. Your core counties have a fairly diverse economic base. You have health care, for example, which is very stable. You’ve got a university presence, and that’s a very stable source of economic growth,” Murray, who’s directed the annual economic report for 25 years, said.
“You also have a fairly strong manufacturing sector in the Tri-Cities region, and that’s going to continue to grow for the next couple of years. But we do expect, as we get into the 2020s, that we’re going to see employment losses appear again in the manufacturing base of the state, and therefore, your regional economy around the Tri-Cities.”
While the leisure and hospitality sectors are expected to slow, the professional and business services sector and the transportation and utilities sector is predicted to see robust gains.
In this year’s report, the Boyd Center dedicated a chapter to describing the implications of federal tax reform and President Donald Trump’s trade tariffs.
“The net effect of tax reform is likely to be a short-term boost to economic growth through 2019. Tariffs, on the other hand, are leading to higher consumer and producer prices as well as job losses throughout the country,” a press release accompanying the report stated.
Murray said its currently too early to really grasp the impact of Trump’s tariffs, but he did warn that tens of thousands of Tennessee jobs are at risk to some degree because of the retaliatory tariffs imposed by China and other counties.